Rick Santelli was on King World News today, discussing the distinction between deflation and deleveraging, or what some have dubbed the phenomenon of surging prices in things that one can buy without leverage (Friday's limit up open in various commodities being one example), and plunging prices in everything that requires debt (i.e., one's house). And while the Fed can game the CPI as much as it wants, once middle America see the cost of basic foodstuffs double (and it will once producers hit negative profit margins and are forced to pass input cost inflation to end consumers) they will realize just how serious this problem will be. Of course, the only way to offset this localized inflation is by returning to the time when America could use its houses as piggybanks in the form of taking out equity lines of credit. The problem with that, of course, is that the Fed will be forced to increase home prices at all costs, even as speculators take basic commodity prices up in anticipation of the coming hyperinflation. Which means that the Fed will be behind the ball, and will be forced to increasingly devalue the dollar as it is now obvious that no matter how cheap credit becomes, and how pervasive free money is, the last thing to go up are home prices which make up the bulk of US consumer "wealth." As such, today's collapse in the ceasefire in monetary talk is no surprise: every central bank is fully aware that with the monetary component to intervention, via cheap credit, now priced in, but priced in in terms of equities and commodities, the only way to create equity value in housing (of which per some estimates, 25% of all homes (and rapidly rising) are underwater to the underlying mortgage) is to broadly debase the currency. This is now a virtual certainty, and the higher gold (and soybeans, and corn, and what) goes, the faster the Fed will need to destroy the dollar, making the vicious loop of hyperinflation spin faster and faster...
We dare the deflationists out there to look at the charts of coffee, barley, oranges, pork, cotton, rubber, iron ore, and tell us where is this much-hyped deflation...The right answer, of course, lies in one simple word - and as Santelli confirms what every Zero Hedge readers knows, it is "monetization."